[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Proposed Rules]
[Pages 43856-43858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20508]



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Part IV





Department of Defense





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Office of the Secretary



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32 CFR Parts 230, 231, and 231a



Financial Institutions on DoD Installations; Proposed Rule     
Procedures Governing Banks, Credit Unions and Other Financial 
Institutions on DoD Installations; Proposed Rule

  Federal Register / Vol. 64, No. 154 / Wednesday, August 11, 1999 / 
Proposed Rules  

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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 230 and 231a

[0790-AG73]


Financial Institutions on DoD Installations

AGENCY: Department of Defense.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to remove 32 CFR part 231a, ``Procedures 
governing Banking Offices on DoD Installations'' and to revise part 230 
on ``Financial Institutions on DoD Installations.'' This rule is being 
promulgated to provide administrative guidelines for the operation of 
banks and credit unions on domestic and overseas installations of the 
Department of Defense and address areas such as the solicitation for 
such services, the types of services and the logistics support 
provided.

DATES: Comments must be received by October 12, 1999.

ADDRESSES: Forward comments to OUSD(C), 1745 Jefferson Davis Highway, 
Suite 201, Arlington, VA 22202.

FOR FURTHER INFORMATION CONTACT: T. Summers, 703-602-0299.

SUPPLEMENTARY INFORMATION:

Executive Order 12866, Regulatory Planning and Review

    It has been determined that 32 CFR part 230 is not a significant 
regulatory action. The rule does not:
    (1) Have an annual effect to the economy of $100 million or more or 
adversely affect in a material way the economy; a section of the 
economy; productivity; competition; jobs; the environment; public 
health or safety; or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another Agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.

Public Law 96-354, Regulatory Flexibility Act (5 U.S.C. 601)

    It has been certified that this rule is not subject to the 
Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. This rule is being promulgated to provide 
administrative guidelines for the operation of banks and credit unions 
on domestic and overseas installations of the Department of Defense and 
address areas such as the solicitation for such services, the types of 
services and the logistics support provided.

Public Law 96-511, Paperwork Reduction Act (44 U.S.C. Chapter 35)

    It has been certified that this part does not impose any reporting 
or recordkeeping requirements under the Paperwork Reduction Act of 
1995.

List of Subjects in 32 CFR Part 230 and 231a

    Armed forces, Banks, banking, Credit unions, Federal buildings and 
facilities.
    Accordingly, 32 CFR part 230 is proposed to be revised to read as 
follows:

PART 230--FINANCIAL INSTITUTIONS ON DOD INSTALLATIONS

Sec.
230.1  Purpose.
230.2  Applicability.
230.3  Definitions.
230.4  Policy.
230.5  Responsibilities.

    Authority: 10 U.S.C. 136

Sec. 230.1  Purpose.

    This part:
    (a) Updates policies and responsibilities for financial 
institutions that serve Department of Defense (DoD) personnel on DoD 
installations worldwide. Associated procedures are contained in DoD 
7000.14-R\1\.
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    \1\ Copies may be obtained at http://web 7.whs.osd.mil/
corres.htm
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    (b) Ensures that arrangements for the provision of services by 
financial institutions are consistent among the DoD Components, and 
that financial institutions operating on DoD installations provide, and 
are provided, support consistent with the policies stated in this part.


Sec. 230.2  Applicability.

    This part applies to the Office of the Secretary of Defense, the 
Military Departments, the Chairman of the Joint Chiefs of Staff, the 
Combatant Commands, the Inspector General of the Department of Defense, 
the Defense Agencies, the DoD Field Activities, and all other 
organizational entities within the Department of Defense (hereafter 
referred to as the ``DoD Components.''


Sec. 230.3  Definitions.

    Terms used in this part are set forth in 32 CFR part 231.


Sec. 230.4  Policy.

    (a) The following pertains to financial institutions on domestic 
DoD installations:
    (1) Except where they already may exist as of July 1, 1999, no more 
than one banking institution and one credit union shall be permitted to 
operate on a DoD installation.
    (2) Upon the request of an installation commander and with the 
approval of the Secretary of the Military Department concerned (or 
designee), duly chartered financial institutions may be authorized to 
provide financial services on DoD installations to enhance the morale 
and welfare of DoD personnel and facilitate the administration of 
public and quasi-public monies. Arrangement for the provision of such 
services shall be in accordance with this part and related issuances.
    (3) Financial institutions or branches thereof, shall be 
established on DoD installations only after approval by the Secretary 
of the Military Department concerned (or designee) and the appropriate 
regulatory agency.
    (i) Only banking institutions insured by the Federal Deposit 
Insurance Corporation (FDIC) and credit unions insured by the National 
Credit Union Share Insurance Fund (NCUSIF) shall operate on DoD 
installations. These financial institutions may be either state or 
federally chartered. Foreign banking institutions operating on overseas 
DoD installations and chartered to provide financial services in that 
country are excepted from this requirement.
    (ii) Military banking facilities (MBFs) shall be established on DoD 
installations only when a demonstrated and justified need cannot be met 
through other means. Normally, MBFs shall be authorized only at 
overseas locations. They may be considered for use at domestic DoD 
installations only when DoD Components have been unable to obtain, 
through normal means, financial services from a state or federally 
chartered financial institution authorized to operate in that state. In 
times of mobilization, it may become necessary to designate additional 
MBFs as an emergency measure. The Director, Defense Finance and 
Accounting Service (DFAS) may recommend the designation of banking 
facilities to the Department of the Treasury under provisions of 12 
U.S.C. 265.
    (iii) Retail banking operations shall not be performed by any DoD 
Component. Solicitations for such services shall be issued, or 
proposals

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accepted, only in accordance with the policies identified in this part. 
DoD Components shall rely on commercially available sources in 
accordance with DoD Directive 4100.15\2\.
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    \2\ See footnote 1 to Sec. 230.1(a).
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    (iv) Retail fees and services for products (to include related 
minimum balance requirements for noninterest checking, Negotiable Order 
of Withdrawal (NOW) and savings accounts) offered by financial 
institutions operating on domestic installations and domestic credit 
unions operating on DoD installations overseas shall not exceed 110 
percent of the industry-wide averages for banks in the ``Annual Report 
to Congress on Retail Fees and Services of Depository Institutions,'' 
published by the Board of Governors of the Federal Reserve System.
    (4) Installation commanders shall not seek the provision of 
financial services from any entity other than the on-base banking 
office or credit union. The Director, DFAS, with the concurrence of the 
Under Secretary of Defense Comptroller), (USD(C)), may approve 
exceptions to this policy. Such requests for exception shall be 
proposed through the Secretary of the Military Department concerned (or 
designee).
    (5) Financial institutions authorized to locate on DoD 
installations shall be provided logistic support as set forth in Volume 
5 of the DoD Financial Management Regulation (DoD 7000.14-R).
    (6) Military disbursing offices, nonappropriated fund 
instrumentalities including MWR activities, the Military Exchange 
Services and other DoD Component activities requiring financial 
services shall use on-base financial institutions to the maximum extent 
feasible and consistent with sound management practice.
    (7) The Department encourages the delivery of retail financial 
services on DoD installations via nationally networked automated teller 
machines (ATMs). ATMs are considered electronic banking services and, 
as such, shall be provided only by duly chartered financial 
institutions.
    (i) Notwithstanding the provisions contained in paragraph (a) (3) 
(iv) of this section, on-base ATM service offered by financial 
institutions operating on domestic installations and domestic credit 
unions operating on DoD installations overseas shall be provided 
without surcharge.
    (ii) Proposals by the installation commander to install ATMs from 
other than on-base financial institutions shall comply with the 
provisions of paragraph (a) (4) of this section, and will be considered 
only when ATM service is unavailable or existing service is inadequate 
and the on-base financial institution(s) either declines to provide the 
service, fails to improve existing service so that it is adequate or 
does not formally respond to the request within 30 days of the date of 
the request.
    (8) Expansion of financial services (to include in-store banking) 
provided by on base financial institutions must be approved by the 
installation commander. Such requests for expansion of services should 
be coordinated with the installation bank/credit union liaison officer 
prior to the commander's consideration. Approved expansion of services 
will be documented as an amendment to the existing operating agreement 
between the installation commander and the on-base financial 
institution. The amendment to the operating agreement and any required 
lease (to include a change to an existing lease) shall be in place 
prior to the initiation of new financial services or offices.
    (9) The installation commander shall ensure, to the maximum extent 
feasible, that all financial institutions operating on his or her 
installation are given the opportunity to participate in pilot programs 
to demonstrate new financial-related technology (e.g., smart cards) or 
establish new business lines (e.g., in-store banking) where a 
determination has been made by the installation commander that the 
offering of such services is warranted.
    (10) Requests for termination of financial services must be 
approved by the installation commander, substantiated by sufficient 
evidence and forwarded to the Secretary of the Military Department 
concerned (or designee). The Secretary of the Military Department (or 
designee) shall coordinate such requests with the Under Secretary of 
Defense (Comptroller), through the Director, DFAS, before notification 
to the appropriate regulatory agency.
    (b) The following pertains to financial institutions on overseas 
DoD installations:
    (1) The extension of services by MBFs and credit unions overseas 
shall be consistent with the policies stated in this part and with the 
pertinent status of forces agreement, other intergovernmental 
agreement, or host-country law.
    (2) The policies governing the operation of financial institutions 
on domestic DoD installations identified in paragraph (a) of this 
section shall apply to financial institutions operating overseas.
    (3) Financial services at overseas DoD installations may be 
provided by:
    (i) Domestic on-base credit unions operating overseas under a 
geographic franchise and, where applicable, as authorized by the 
pertinent status of forces agreement, other intergovernmental 
agreement, or host-country law.
    (ii) MBFs operated under and authorized by the pertinent status of 
forces agreement, other intergovernmental agreement, or host-country 
law.
    (iii) Domestic and foreign banks located on overseas DoD 
installations that are:
    (A) Chartered to provide financial services in that country, and
    (B) A party to a formal operating agreement with the installation 
commander to provide such services, and
    (C) Identified, where applicable, in the status of forces 
agreements, other intergovernmental agreements, or host-country law.
    (4) Financial institutions authorized to locate on DoD 
installations shall be provided logistical support as set forth in the 
Volume 5 of the DoD Financial Management Regulation (DoD 7000.14-R).
    (5) In countries served by MBFs operated under contract, 
nonappropriated fund instrumentalities and on-base credit unions that 
desire and are authorized to provide accommodation exchange services 
shall acquire foreign currency from the MBF at the MBF accommodation 
rate; and shall sell such foreign currency at a rate of exchange that 
is no more favorable to the customer than that available from the MBF.
    (6) Additional guidance pertaining to financial services overseas 
is set forth in Volume 5 of DoD 7000.14-R.


Sec. 230.5  Responsibilities.

    (a) The Under Secretary of Defense (Comptroller) (USD(C)) shall 
develop and monitor policies governing establishment, operation, and 
termination of financial institutions on DoD installations and take 
final action on requests for exceptions to this part.
    (b) The Under Secretary of Defense (Acquisition and Technology) 
(USD(A&T)) shall develop and monitor policies and procedures governing 
logistical support furnished to financial institutions on DoD 
installations, including the use of DoD real property and equipment.
    (c) The Under Secretary of Defense (Personnel and Readiness) 
(USD(P&R)) shall advise the USD(C) on all aspects of on-base financial 
institution services

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that affect the morale and welfare of DoD personnel.
    (d) DoD Component responsibilities pertaining to this part are set 
forth in Volume 5 of the DoD Financial Management Regulation (DoD 
7000.14-R).

PART 231a--[Removed]

    By the authority of 10 U.S.C. 301, 32 CFR part 231a is proposed 
to be removed.

    Dated: August 5, 1999.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 99-20508 Filed 8-10-99; 8:45 am]
BILLING CODE 5001-10-P